The present application relates generally to payment account networks and, more particularly, to network-based systems and methods for predicting the likelihood of a payment transaction resulting in a chargeback.
When a user of an account, such as an account associated with a payment card such as a credit card or a debit card, authorizes a transaction to purchase goods or services from a merchant using the account, an acquiring bank (i.e., the merchant bank) reimburses the merchant for the transaction. The acquiring bank then settles those funds with an issuing bank (issuer) of the account corresponding to the payment card or with a third-party processor authorized to act on behalf of the issuing bank by presenting the transaction into a transaction payment network. In a process known as clearing, transaction data is moved from the acquiring bank to the payment network, and from the payment network to the issuing bank. After clearing, settlement of the final payment occurs. Settlement is a process used to exchange funds between the acquiring bank and the issuing bank (or third party processor) for the net value of a batch of all monetary transactions that have cleared for that processing day.
On occasion, the consumer may be unsatisfied with the goods or services provided by the merchant, may not recognize the purchase, may determine the purchase is fraudulent, or may otherwise dispute the transaction. In these examples, the consumer may return the goods and/or request a chargeback from the issuing bank. The chargeback may be used to return the funds to the account corresponding to the payment card. Generally, the issuing bank immediately issues a credit to the account for the amount of the transaction. The issuing bank then sends a chargeback request to an issuer processor, and the request is collected with other requests and submitted in a batch to the payment network. Each time a user of the account informs the issuing bank of a potential chargeback, the issuing bank must pay a fee to get the process started to determine which party will be left with the cost of the purchase of the item or services. Depending on the outcome, the account in question, the issuing bank, the acquiring bank, or the merchant may be left with the cost of the transaction.
The threat of the reversal of funds often forces merchants to provide quality products, helpful customer service, and timely refunds, among other things. However, a merchant may likewise dispute the chargeback with the assistance of the merchant's acquiring bank. The issuing bank and the acquiring bank may then attempt to mediate the charge through a dispute process. The result is that the chargeback process uses valuable banking resources and causes additional processing time in order to resolve the chargeback request. Furthermore, if the issuing bank and the acquiring bank cannot come to an agreement on the chargeback, the payment processor may have to step in and make a final decision, thus using additional valuable resources.
Therefore, in an effort to conserve time and resources, it may be beneficial for a bank to deny a valid transaction or a potentially invalid transaction when it is determined that such a transaction will likely become a chargeback. It may also be beneficial for a bank to know how many potential chargeback requests are potentially out there in the waiting.